Financing Civil Society reflections from Venturesome

1. Financing Civil Societyreflections from Venturesome Bea Devlin Head of International Development CAF September 2008

2. 2 Reflections Venturesome�s approach What have we learned in the UK What this might mean for South Africa

3. 3 Venturesome: filling an investment gapstarted 2002 High risk fund, responding to finance needs of small/medium UK civil society organisations & social enterprises, in space between grants and commercial loans Adapt commercial instruments: private equity/venture capital models; recycle funds; portfolio approach Stimulate the market John Kingston 15 yrs with 3i Europe�s largest Venture Capital organisation and then Director Save the Children, exploring financial mechanisms relevant/helpful to charities Eg Church redevelopment plans used unsecured debt and underwriting Small/medium orgs have little surplus, unable to manage cash flow, invest in innovation/development; banks wary Test ideas: Risk much lower than perceived, risk wouldn�t be any more than providing a grant which CAF already doing John Kingston 15 yrs with 3i Europe�s largest Venture Capital organisation and then Director Save the Children, exploring financial mechanisms relevant/helpful to charities Eg Church redevelopment plans used unsecured debt and underwriting Small/medium orgs have little surplus, unable to manage cash flow, invest in innovation/development; banks wary Test ideas: Risk much lower than perceived, risk wouldn�t be any more than providing a grant which CAF already doing

4. 4 Social investment: a vision Civil society organisations have access to the appropriate expertise and capital that enables them to increase social impact and to build their financial resilience

5. 5 UK context: funding civil society organisations To mid 1990s: Donations and grants given for recurrent expenditure (eg staff, programme delivery) and capital spend (eg property purchase) 1995 CAF launched a lender (Investors in Society became Charity Bank); bank loans model, minimal losses 2002 Venturesome launched higher risk approach in space between grants and bank loans Civil society organisations = working to achieve positive social change, social impact is core to mission Capital/loans are not a substitute for income CAF was and is grant maker, Investors in Society become Charity Bank started by making loans to charities for buildings 1996 CAF established Investors in Society to make loans to charities, loans rare, at that time banks & charities unwilling to enter loan space � saw as high risk. Investors in Society positive, CAF considered higher risk fund Civil society organisations = working to achieve positive social change, social impact is core to mission Capital/loans are not a substitute for income CAF was and is grant maker, Investors in Society become Charity Bank started by making loans to charities for buildings 1996 CAF established Investors in Society to make loans to charities, loans rare, at that time banks & charities unwilling to enter loan space � saw as high risk. Investors in Society positive, CAF considered higher risk fund

6. 6 Venturesome�s approach Venturesome was set up as a high risk fund to: Provide finance in the space between a grant and a loan Lend or invest in organisations achieving social impact Take higher levels of financial risk than a bank, in exchange for helping achieve social impact Treat organisations as customers/partners not applicants Help clarify organisation�s objectives and raise appropriate funds Increase range of finance options used by civil society Stimulate/build a social investment market Portfolio � 25% pre funding; 20 wking capital, 55% development Risk up to 50% of some investments might not be returned, target recycling rate 75-80% Portfolio � 25% pre funding; 20 wking capital, 55% development Risk up to 50% of some investments might not be returned, target recycling rate 75-80%

7. 7 Funding for Venturesome Funding for Venturesome has been �philanthropic� CAF Corporates: financial institutions Individuals: finance/business people Grantmaking Foundations Funders support because: attracted to model: recycling / leverage of funds want to be part of creating a social investment market inspired by the organisations supported Individuals making gifts �50k to �1.5m over time Pilot phase: CAF, 2 corporates, 1 individual Development phase � easier to attract investment � grant making trusts; social investment market growing Our investors are `donors� � 12 investors plus CAF 2008 �8m approx 1/3 CAF/Barclays; 1/3 private philanthropists; 1/3 grantmaking foundations CAF interested funders in model through conversations, meetings, as fund developed website became more important to disseminate information, build brand Report to funders every 6 monthsIndividuals making gifts �50k to �1.5m over time Pilot phase: CAF, 2 corporates, 1 individual Development phase � easier to attract investment � grant making trusts; social investment market growing Our investors are `donors� � 12 investors plus CAF 2008 �8m approx 1/3 CAF/Barclays; 1/3 private philanthropists; 1/3 grantmaking foundations CAF interested funders in model through conversations, meetings, as fund developed website became more important to disseminate information, build brand Report to funders every 6 months

8. 8 Venturesome model